DOL Subpoena Approach Comes Under Scrutiny

ESOP companies that are willing to cooperate with the Department of Labor got some good news this month.

There have been several reports that the Department opened investigations of ESOPs by subpoenaing ESOP trustees and company executives. That’s a rather drastic approach: A subpoena—which carries serious significant legal weight and repercussions—is the “big stick” in an investigation, and typically is used only when companies refuse to cooperate.

At a March 16 hearing of the House Committee on Education and the Workforce, Congressman Brett Guthrie voiced his concern about the approach to Labor Secretary Thomas Perez.

The exchange was cordial and positive.

Rep. Guthrie said he had heard reports, “not rare occurrences, but more common,” that the Department was issuing subpoenas before notifying ESOP companies they were even under investigation.

“If that is occurring,” he asked, “would you be willing to review the process?”

Rep. Guthrie noted that “we have to be careful” about using the federal government’s subpoena power, and that companies should first have the opportunity to willingly comply with requests for information.

“There needs to be oversight, but if we can do it mutually, working together, as opposed to the adversarial” approach, that is more desirable, he said. He also noted that if a company proves combative, “we obviously have the right and the power to” issue a subpoena later.

Perez said he was not aware of the issue and would be “happy to look into this.” He noted there is no substitute for discussing an issue and finding a pathway forward.

“My team will reach out to your staff after today,” he told Rep. Guthrie.
The promising exchange brought a troubling situation to light and offers hope that an unnecessarily burdensome enforcement tactic may soon come to an end.